April 24 2015

PLY: Let’s face it this week has been emotional. A frantic week ends in curiosity and recriminations about where the lawsuit missiles will deliver payload on the whole “Flash Crash” becomes a Surveillance Hash issue. Bob Greifeld, to give one example, proclaims paranoia – which is the best approach possible for a man in his position methinks. Meanwhile the regulators have used this (sensibly) to note they haven’t got enough money – so the deregulation wave is probably coming along with a lot of fines.

It’s not all about an upcoming crackdown on exchanges but it may feel that way. Happy scrolling, I am, after a frantic week, taking the rest of the day off. Will reconvene Monday…

Meanwhile for those exchanges which survive the next few turbulent, litigious weeks, Wondrous milestones are ahead for Exchange Invest – with our 500th Anniversary and 2nd anniversary all falling into the same week in the middle of next month. Before then, may I just ask those of you not currently in a commercial relationship with our offices to consider support by Sponsorship or Premium Subscription?

Email me and let’s have a dialogue on the way you and your business can support the industry daily read on market infrastructure and give you more pith and insights going forward.

Meanwhile, we’re seeking interesting FinTech ideas to take to Startupbootcamp in London. My StartUp club in Poland Mission ToRun is co-organising the FastTrack pitch day in Warsaw, May 19th and we welcome participants from anywhere to apply…more details by clicking on the link below:

Warsaw 19 Poster Final


New Premium posts:

Nope-n Access – The Incumbents Strike Back
NLX On Life Support
After NLX The Ramifications
Bloomberg Down – Embarrassing But Hardly Scorched Earth?

Happy Reading and Thanks to all our subscribers for their support You can Subscribe here.

And on top of that today we even have another new video today!

Here is the latest in my series of Cinnober Videos, discussing the new risk and clearing culture – here.

cinnober 7


Previous Cinnober videos

LME Clear’s impact on the clearing industry

The most fascinating era for capital markets which we are lucky to be witnessing:

The future of money – where is cryptocurrency heading?

What will the launch of real-time clearing at BM&FBOVESPA mean for the industry?

Meanwhile, our Premium Briefs keeping you abreast of various industry issues are updated daily when news arises. All topics covered can be found on our dedicated Briefs page via Exchange Invest Premium.

The latest include:

India – GIFT Exchanges Brief NEW!
A Taste Of HFT Scandal Brief – Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 NEW!
Vietnam Exchanges Merger Brief 
CVC Betfair Bid Brief 
India – NSE Sales Brief
EU CMU Brief
EU FTT Brief Part 1Part 2 
NSEL Scandal Brief – Main File
NSEL scandal – FTIL Group – Board and Management Changes Brief – Part 1 and Part 2

Our Premium service is a unique source of industry analysis – insight in a low latency environment if you like. Can you afford not to be a subscriber? $120 per user/year helps keep Exchange Invest daily Free. Subscribe here or reply to this email and I will invoice you forthwith.

Public Markets

E*TRADE Q1 2015 Financial Results

Total net revenue $456 mln, down 4%
Total operating expense $300 mln, up 3.4%
Net income $40 mln, down 59%

IBKR To Acquire Online Investing Marketplace Covestor
Maria Nikolov – LeapRate

The mergers and acquisitions wave is spreading across the online trading industry, with IBKR unveiling a deal that will see it buy online investing marketplace Covestor, no financial details.

Covestor prides itself as a pioneer in the online investing business and the first digital asset management company to provide both active and passive investment options.

Read our Premium Exchange Deals Brief.

PLY: Likely first of many as all manner of digital investor platforms are springing up…

NASDAQ Robert Greifeld On Q1 2015 Results – Earnings Call Transcript (subscription)
Seeking Alpha


Edward P. Ditmire – VP-IR
Robert Greifeld – CEO & Director
Lee Shavel – CFO & EVP-Corporate Strategy

Brian B. Bedell – Deutsche Bank Securities, Inc.

“Bob, if you could talk a little bit about the energy platform initiative? How it differs from NLX in structure and then if could also comment on what you’re thinking about NLX in terms of timing of – if you continue to go with that and if it still a $0.02 drag per quarter?”

Robert Greifeld – CEO & Director

“With respect to NLX, you had basically NFX learn from NLX and now NLX is trying to learn from the model that was negotiated with our partners in NFX and we remain, I think optimistic that we have a future for NLX. We watch it every day and as you’ve highlighted with your number here, we have reduced the operating cost of NLX quite dramatically.”

Read our Premium posts NLX On Life Support and After NLX The Ramifications and our Premium NLX Brief

PLY: Great management is of course delivered by exceptional out of the box thinking. My problem is that right now NASDAQ is predicating ETD growth on a failed “right in the box” MTF in London and now a “new” (how so?) model in energy which I still believe is the worst constructed premise for a new platform seen for years. NASDAQ has great business lines…elsewhere.

Nasdaq To Settle Facebook IPO Lawsuit For $26.5 Mln
John McCrank – Reuters

In a first for a U.S. stock exchange, Nasdaq on Thursday agreed to pay $26.5 million (17.60 million pounds) to settle a class-action lawsuit involving its bungling of Facebook’s $16 billion IPO, the plaintiffs’ lawyers said.

The settlement is significant because exchanges are responsible for policing their own markets and therefore are legally immune from private liability for damages incurred when they are performing regulatory functions like conducting an IPO.

PLY: Does this create a precedent which may impact when the “Flash Crash” suits likely emerge? It’s a step in one direction but how far will it be…

Colombian Stock Exchange Favors Having Brazil In Integration
Katia Porzecanski – Bloomberg

Colombia’s stock exchange informally discussed selling a stake to its Brazilian counterpart as part of a move toward an integrated regional market.

Juan Pablo Cordoba, President of Bolsa de Valores de Colombia, said the Brazilian exchange would prefer a process leading to a board position but that no formal conversations have been held.

FAO: Recently BM&FBovespa bought a 2% stake in Chile’s Bolsa de Comercio de Santiago – Read our Premium MILA Exchanges Brief

Supervisors Look to Bank Stress Tests For Clues About Clearinghouses (subscription)
Katy Burne – Wall Street Journal

International market supervisors, moving to fortify so-called “clearinghouses” that act as a key safety net for the financial system, are taking lessons from bank stress tests.

Swaptions Clearing Raises CCP Risk Fears
Helen Bartholomew – IFR

Clearing houses may be increasing risk for their members by adding products that some market participants believe are best suited to the bilateral environment.

CME is poised to begin clearing swaptions (previous comments here), pending regulatory approval, leapfrogging LCH.Clearnet’s Swapclear, which has been tussling with the product for a number of years, but has now put plans on the back burner.

PLY: The clear call from JPM securities at ISDA is a sign of concern all round although as always the issue is not purely bilateral in any sense.

Navinder Singh Sarao: Our Spoofing Hero
Bronte Capital
How One Man Could Tank The Stock Market
Susie Poppick – Time

It took me a while to get my head around just how ludicrous the assertion that a kid (Navinder Singh Sarao) trading a few thousand e-mini contracts caused the “flash crash” was. He did this every day for a few hundred days – and almost every day there was no flash crash. Then there was a flash crash – so ergo – a kid in his basement caused it.

He did this by “spoofing” which is an illegal form of market manipulation.

PLY: The pithmeister of the Australian hedge fund community John Hempton once again hits the nail on the head, further to my noting yesterday how remarkable the division had become to arrive at a lowest common denominator in a semi detached house in suburban London.

As even Time Magazine notes:

“It’s unlikely that a single person caused the 2010 “flash crash” in which the Dow momentarily lost 1,000 points. But here’s how the Feds say one guy helped trigger it.”

CME Faces Questions Over Missed Red Flags (subscription)
Financial Times

PLY Big questions certainly arise here – as it would seem there is some form of public-private co-operation looming which will fashion a noose for CME on surveillance…and that opens a vast can of worms which I believe can include a domino wave of litigation against other markets/platforms and exchanges.

Sarao Cancelled 99% Of Orders – CFTC Civil Complaint

Navinder Singh Sarao was cancelling more than 99% of his orders on days examined by CFTC, according to civil-case documents filed with the U.S. District Court of Northern District of Illinois.

PLY: Is it a multi-payload missile or a legal juggernaut. Either way, guess who wins here? It clearly isn’t market shareholders and I fear nobody will carry the can given the way regulators have until now pussy footed about around prevailing allegations.

Nasdaq CEO: Exchange Operators Should ‘Assume The Worst’ On Market Manipulation Efforts (subscription)
Bradley Hope – Wall Street Journal

‘We need to be paranoid,’ Nasdaq CEO Robert Greifeld says.

PLY: This is clearly significant news, as of course Mr Greifeld will know full well that his own IT arm’s surveillance solution (SMARTS) has vast quantities of tools throbbing through its hardware that discerns pretty much every dubious practice known to man or beast…

Bob Greifeld is precisely right to be paranoid in other words.

Flash Crash Case Exposes Resource Gap Limiting CFTC, Massad Says
Silla Brush – Bloomberg

PLY: And not just at the CFTC, as our continuing crusade for pragmatic, sensible, and sensibly funded, regulation continues.

CFTC Hits Deutsche Bank For Largest Fine In History, Taking Total Penalty To $2.5 Billion
Andrew Saks-McLeod – Leaprate

CFTC, FCA, US Department of Justice, and New York State Department of Financial Services have collectively issued their penalties to Deutsche Bank, with fines topping $2.5 billion.

CFTC’s Massad To Review SEF MAT Process
Remarks Of CFTC Chairman Timothy Massad Before The ISDA 30th AGM

HKEx – Partial Cancellation Of Bonds Due To Conversion

Private Markets

S. Korea To Lower Hurdles For KONEX
Kim Boram & Kim Eun-jung – Yonhap

South Korea’s financial regulator said Thursday it will ease regulations on the country’s third stock exchange next month, in a move to help bring in more retail investors and start-ups to the burgeoning bourse.

In June 2013, the country launched Korea New Exchange (KONEX), a stock trading platform where start-ups and smaller firms can raise funds easily via stock sales instead of having to borrow from banks which boasts 80 listings up from 21 at foundation.

FAO: South Korea’s financial watchdog, FSC, announced last month that it plans to restructure the bourse system in order to allow its markets to compete.

Former HKMEx Employees Tell How They Bought Into Disgraced Boss Barry Cheung’s Optimism (subscription)
Chris Lau – South China Morning Post

HKMEx might have failed to pay wages, but its staff kept their chins up – initially – for they had a larger-than-life boss who was the right-hand man of the city’s chief executive, an executive councillor and Urban Renewal Authority chairman all rolled into one.

FAO: Previous mentions and comments on the fate of HKMEx here and here.

PLY: A sad tale of extreme hubris, even for an exchange CEO.

Special Section: FTI, NSEL, India at the Crossroads

PLY: MCX off 3%, FTIL off 2%, desecration of Indian corporate governance postponed:

FTIL Case: CLB Hearing Put Off Till May 12
The Hindu Business Line

The Company Law Board (CLB) will now hear the Corporate Affairs Ministry’s petition in the Financial Technologies case on May 12. The FTIL matter was listed for hearing on Thursday. Meanwhile, the Bombay High Court will on Friday hear the MCA’s plea seeking time till July 31 to review the objections raised by 19,000 FTIL shareholders against the merger of NSEL with FTIL.

Read our Premium NSEL-FTIL Merger Brief and NSEL Scandal Brief – Main File.


Euronext Taps Screen For Reporting, Billing Platform (subscription)
Waters Technology

Euronext has rolled out the InfoMatch data costs and inventory management platform from Dutch vendor Screen InfoMatch to support its customer billing and reporting activities, as it fills in the systems gaps left by its spin-off from ICE.


PMEX Begins Second Innings With ICotton Contract

Pakistan Mercantile Exchange (PMEX) has re-launched International Cotton (ICotton) contract which is duly approved by SECP. The contract aims to offer opportunities to the entire value chain of the textiles sector to hedge the risk of price variation of their basic raw material, cotton.

ETFs To Play Vital Role In Mena
Trade Arabia

Globalisation for Mena securities exchanges is now about putting down roots at home as opposed to global mergers, experts concurred at the AFE Equities Summit 2015.

LSE Celebrates 15th Anniversary Of First London ETF Listing

Ontario Securities Commission Publishes Report On Canadian Fixed Income Market And Details Next Steps To Enhance Regulation & Transparency


Nasdaq Surpasses Its Dotcom Boom Record (subscription)
Michael Mackenzie, Nicole Bullock & Eric Platt – Financial Times

The Nasdaq Composite closed in record territory on Thursday, completing a 15 year recovery from one of the most spectacular equity market busts experienced by investors.
The $7.7tn technology bellwether has finally topped its March 2000 dotcom bubble peak of 5,048.62, closing at 5,056.06 and within easy distance of the intraday record of 5,132.52.

Career Paths

ISDA announced the election of 12 directors at its 30th AGM in Montreal.

Two new directors were elected. They are:

Yasunobu Arima, GM, Global Markets Planning Division, The Bank of Tokyo-Mitsubishi
Sam Skerry, Global Head of Structured Products and IST Commercial Support, BP

10 directors were re-elected:

Keith Bailey, MD, Market Structure, Barclays
Nitin Gulabani, Global Head of FX, Rates and Credit Trading, Standard Chartered Bank
Rich Herman, Head of Global Fixed Income & Currencies (FIC), Deutsche Bank Securities
Kieran Higgins, Head of Trading, Corporate & Institutional Banking, The Royal Bank of Scotland
Jonathan Hunter, Global Head of Fixed Income and Currencies, RBC Capital Markets
TJ Lim, Global Head of Markets, UniCredit
Eric Litvack, MD, Head of Regulatory Strategy, Société Générale Global Banking And Investor Solutions
Christopher Murphy, Global Co-Head of FX, Rates & Credit, UBS Investment Bank
Ciaran O’Flynn, MD, Global Co-Head of Fixed Income Electronic Trading, Morgan Stanley
Emmanuel Ramambason, Head of Global Market xVA Trading, BNP Paribas

The directors continuing on the Board are:

Biswarup Chatterjee, Global Head Electronic Trading & New Business Development, Credit Markets, Citigroup Global Markets
Bill De Leon, MD, Global Head of Portfolio Risk Management, PIMCO
Elie El Hayek, MD, Global Head of Rates, Credit and EM Global Markets, HSBC Bank
Diane Genova, MD and General Counsel, Global Markets, JP Morgan Chase
Jonathan Hall, Advisory Director, Goldman Sachs
George Handjinicolaou, Deputy CEO, ISDA
Ted MacDonald, MD, DE Shaw & Co, LP., Chief Risk Officer, DE Shaw Group
Scott O’Malia, CEO, ISDA
Richard Prager, MD and Global Head of Trading and Liquidity Strategies, BlackRock
Will Roberts, Head of Global Rates, Structured Credit Trading and Counterparty Portfolio Management, BAML
Koji Sakurai, SVP, Head of Business Planning Team, Derivative Products Division, Mizuho Bank, Ltd.
Eraj Shirvani, Head of Fixed Income for EMEA and Global Head of Emerging Markets for Investment Banking, Credit Suisse
Emmanuel Vercoustre, Deputy CEO & CFO, AXA Bank Europe

Trade Arabia reports that Bahrain Bourse (BHB) CEO Shaikh Khalifa bin Ebrahim Al Khalifa has assumed the rotating presidency of the Arab Federation of Exchanges for the current year.

Financial Calendar

Next week

BVB AGM – Monday
MOEX AGM – Tuesday
SIBEX AGM – Tuesday
BGC Partners’ & GFI Group’s Q1 2015 Financial Results – Wednesday
CME Q1 2015 Financial Results – Thursday

All forthcoming exchange / investment related events are now listed in our Events page.

Analyst Notes

LSE “Add” Rating Reissued By AlphaValue – GBX 2,817 Price Target

A full table of current analysis can be found on our Analyst Ratings page which is updated daily.

All Analysts, Banks and Brokers are welcome to contribute to this section.

Other stories

CFTC’s Division Of Market Oversight Issues Guidance For SEFs On The Calculation Of Projected Operating Costs

Statement Of CFTC Commissioner Mark Wetjen On The Guidance On Financial Resources For Swap Execution Facilities And Other Recent No-Action Relief

Statement Of U.S. Commodity Futures Trading Commissioner Sharon Bowen Regarding Trading Practices On SEFs

Deutsche Bank Fined £227 Million By Financial Conduct Authority For LIBOR And EURIBOR Failings And For Misleading The Regulator
Deutsche Bank To Pay $800 Million Penalty To Settle CFTC Charges Of Manipulation, Attempted Manipulation, And False Reporting Of LIBOR And Euribor – The Fine Imposed On Deutsche Bank Represents The Largest Fine In CFTC’s History – With Today’s Action, The CFTC Has Imposed Over $4 Billion In Penalties Against 13 Banks And Brokers To Address LIBOR And FX Benchmark Abuses
Deutsche Bank To Pay $2.5 Billion, Terminate And Ban Individual Employees, Install Independent Monitor For Interest Rate Manipulation – Widespread Effort By Bank Employees To Manipulate Benchmark Interest Rate Submissions For LIBOR, EURIBOR, TIBOR – Deutsche Bank Employee: This “Is A Corrupt Fixing And DB Is Part Of It!” – Deutsche Bank Employee Seeking To Obtain Lower Rate: “I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…”

PLY: How long before we see the same headlines about market surveillance settlements?

This site is protected by Comment SPAM Wiper.